It IS the Economy, Stupid!

That epithet became famous when it was pinned to the wall in Bill Clinton’s 1992 election campaign office. He won.
In the micro-economy of the media the biggest single factor – as it is with any other sector – is the macro economy. How easily and how often do we forget this? We stress about content strategies, targeted advertising, discovery, personalisation, cord shaving, cord cutting….all important for sure, but all barely count compared to the economic well-being – or otherwise – of your target market (audience).
Entertainment, and TV in particular, used to be seen as counter-cyclical. Consumers who couldn’t afford to go out, go on expensive holidays etc, would watch more TV and be prepared to pay for better television – when you’re watching a lot, a pay-TV sub seems like good value. The fact most sectors of the digital media have sailed on pretty well in the teeth of the 2008 crises and its continuing ripples of austerity proves the point.
But the warning signs are there. No pay-TV consumer now lacks choice. If you don’t want, or can’t afford, a premium pay-TV subscription you have options, and a lot of them. Even more important, traditional pay-TV subs are related to households. If there aren’t as many households, if the population of new and replacement households is falling, then so is the market for pay-TV.
The reason that population is falling is that the following generations that would normally form it are unable to do so. For the first time in living memory, these follow on generations of potential pay-TV subs are worse off than their parents. Often a lot worse off. They have a long list of needs and wants before they peruse the pay-TV market, and that’s before we talk about the amount of alternative, lower cost, more flexible, alternatives they have.
As Larry Gerbrandt astutely points out in a detailed analysis in the upcoming Euromedia, US student debt is now $1.3 trillion – over $30,000 per student average, and more than all credit card debt in the country. This means they are not buying houses or having children as soon as previous generations. Forget the other, marginal, factors; pay-TV subs are falling mainly because the market for them is declining – stuck at home Millennials watch the same parent’s pay-TV they always have. And if they have managed to move out, they can’t afford the luxury of linear pay-TV.
And it isn’t just an American problem, or just a pay-TV problem. Millennials are the key audience for most advertisers. Investment bank Exane/BNP-Paribas says US trends will come to Europe. “Time Warner’s ad revenues were already down 6 percent in Q2 due to tough comps and poorer delivery at domestic entertainment networks. In terms of guidance for Q3, T-W expects ad revenues to decline low single digit in Q3 primarily due to these lower audience delivery trends……

For us, this echoes the European TV Q2 reports where we saw Atresmedia and ProSieben talk down expectations for the FY. They do not see these trends as structural and still expect a rebound in H2 but the read-across from US leads us to believe that it’s tough to remain bullish.”

The bank “turned negative over the European broadcasters as we are increasingly worried about overly high expectations for medium-term TV ad growth in Europe as online platforms continue to gain ad and audience shares. We are sellers of Spanish and Italian TVs, Neutral on Germans, M6 and ITV, while TF1 is our only Buy among European broadcasters.”
And there is no quick fix. Youth unemployment, low wages, high rents and property prices and student debt are all beyond the media’s control. They can’t change the future but had better plan for how it is going to be, not how they’d like it to be.